The Week In Opinion
Ukraine crisis: Whither sanctions, Putin and Russia's foreign exchange reserves?
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A Russian ruble coin, US dollar bills and a dollar coin. The G-7 countries froze Russia’s foreign exchange reserves last month.
PHOTO: AGENCE FRANCE-PRESSE
All sanctions have loopholes and workarounds, and the capacity of Russia's regime and society to withstand the sanctions could be underestimated, says associate editor Vikram Khanna in this commentary.
First, they can cause enormous suffering to people in the targeted countries. But they do not always elicit the desired reactions from their rulers. If sanctions reach the point where they are viewed as an existential threat to the target regime or country, they can trigger military responses.
Second, Russia can expand trade with countries that are not participating in the sanctions.
Third, there are also well-established techniques to evade sanctions that many countries have used, which centre around camouflaging the identities of individuals, firms and countries, as well as the items being traded.
"In and of themselves, economic sanctions on Russia are unlikely to cripple its economy to the point where it can be persuaded to end its war on Ukraine any time soon; what happens on the military front is also important," says Mr Khanna.
What will Putin do next?
The world is in an extremely dangerous situation, and Western policy is exacerbating these risks, says University of Chicago professor John Mearsheimer.
For Russia's leaders, what happens in Ukraine has little to do with their imperial ambitions being thwarted; it is about dealing with what they regard as a direct threat to Russia's future, he says in his commentary.
"Mr Putin may have misjudged Russia's military capabilities, the effectiveness of the Ukrainian resistance and the scope and speed of the Western response, but one should never underestimate how ruthless great powers can be when they believe they are in dire straits."
America and its allies may be able to prevent a Russian victory in Ukraine, but the country will be gravely damaged, if not dismembered. Moreover, there is a serious threat of escalation beyond Ukraine, not to mention the danger of nuclear war, he adds.
Will there be a new monetary order?
Mr Zoltan Pozsar thinks so. The Credit Suisse strategist and former United States Federal Reserve and US Treasury Department official said the current Bretton Woods II order crumbled when the G-7 countries froze Russia's foreign exchange reserves last month.
Simply put, central bank money does not look like the risk-free form of state-guaranteed money it was made out to be. Mr Pozsar also expects a weaker US dollar, and a much stronger renminbi backed by a basket of commodities, to emerge from the crisis.
But hold your horses, say analysts. They tell me in this commentary that the US dollar remains the currency of trade for the global economy.
Also, in the long term, the strength of a country's currency depends on its economic fundamentals. The future of the renminbi, they say, should not be predicted based on a single risk event.
Elsewhere in Opinion
- Now that Ikea has announced it will shut down its stores in Russia, will it deepen Russians' opposition to Mr Putin, or their resentment towards the West?
- Filipinos embrace the lifting of Covid-19 measures with a mixture of relief and unease.
- Meanwhile, stay safe as safe management measures in Singapore are streamlined.
